The U.S. hog market climbed all last week. This in the face of a USDA Hogs and Pigs Inventory Report that indicates expansion in the sow herd last quarter and more pigs in inventory year over year. It appears the market reaction of the USDA report is one of “Don’t think so.”
Observations
Since the USDA report June Lean Hogs up $6.45. A one year high. That’s a gain of $14.00 per head in a week.
Last Friday National Negotiated lean hog price 86.70¢ lb. (highest since August) up $5.23 lb. on the week. Plus $12 per head.
U.S. Pork cut-outs Friday 97.75¢ lb. up 4¢ lb. on the week.
USDA average price 40 lb. feeder pigs last week $97 – the first time in over a year that the year over year price is higher. They were at times in the past year for many weeks in the 30’s
Higher Hog price, Higher Hog futures, Higher Pork cut-outs and Strong Feeder Pig prices. We believe no one pays more than they have too. The pendulum is and has swung. The hog cycle is alive and well. Financial losses always lead to fewer hogs and higher prices.
Prop 12 – remember we read about there would not be enough pork for California due to Prop 12. Notice there is next to no discussion about lack of pork supply. Seems somehow pork is getting there; we do read California eating less and paying more. As if the silent majority of consumers care about pen gestation. Only elitists who talk about food inflation while putting in rules to drive cost of food higher. Dumb and Dumber.
A week ago, USDA reported significantly less corn (6 million acres) would be planted in 2024. Since than corn price fell 8¢ a bushel. We suspect the market believes the 6 million acres will get planted to either corn or soybeans. Farmers farm, the equity in U.S. cropland will encourage planting these acres. Unlike pork production, which is devoid of any significant government financial support, the corn – soybean complex seems to get government money whenever it’s perceived to be needed. Maybe someday the pork industry could get a corn – soybean ethanol mandate type program that would force pork consumption on consumers.
The Avian Flu issues has hit Beef production. Beef cattle and future prices are down. We expect this will blow by. U.S. national news last week talked about a large egg producer losing 2 million layers. They reported like it was the first time in report. There was 10’s of millions of poultry effected in prior years. Thank God, they don’t call it Swine Flu.
China government reports China sow herd declined 242,000 in February, down 2.8 million sows in the last year. There has been major liquidation and it continues. It’s not if but when the dog hits the end of the chain. We expect significantly higher hog prices in China this summer as supply declines towards 1 million less hogs per week. If early wean pig prices are a sign that the train is coming the China national average early wean price on January 12 was 175 RMB ($24.44), April 5 was 602 RMB ($83.38). Summary up, up, up.
Our industry scenario is looking much better. On the 1st of January the 12-month forward analysis using futures indicated loss of at least $10 per head. Last week 12-month forward scenario plus $20 per head. A $30 per head swing. Our industry needs it, the losses were major. No industry can survive losing money forever. We expect as the reality of ever fewer market hogs combined with positive demand factors that lean hog prices over the next few months will be higher there where we are at currently with life of contract lean hog future highs.
